Permali Wallce Ltd. , Bhopal V. Assistant Commissioner of Income Tax 3 (1), Bhopal

ITA 222/Ind/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3177 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-11-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 16-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Section: 143(3); 142(1); 274

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.222/IND/2018 ASSESSMENT YEAR: 2013-14 PERMALI WALLACE LTD. HOSHANGABAD ROAD, BHOPAL / VS. ACIT-3(1) BHOPAL ( APPELLANT ) ( RE VENUE ) PAN: AABCP7557R APPELLANT BY MISS NISHA LAHOTI , CA RE VENUE BY SHRI K . G . GO YAL , SR. DR DATE OF HEARING: 25.11.2019 DATE OF PRONOUNCEMENT: 29.11.2019 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL AT THE INSTANCE OF ASSESSEE PERTAINING TO A.Y. 2013-14 IS DIRECTED AGAINST THE ORDER OF COMMISSION ER OF INCOME TAX(APPEALS)-2, BHOPAL, (IN SHORT CIT), DATED 02. 07.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME T AX ACT 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON 22. 02.2016 BY ACIT- 3(1), BHOPAL. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: PERMALI WALLACE LTD. ITANO.222/IND/2018 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADHOC DISALLOWANCES @ 10% OF THE FOLLOWING GENUINE BUSINE SS EXPENDITURE INCURRED BY THE ASSESSEE IN THE RELEVAN T YEAR:- S.NO. PARTICULARS OF EXPENDITURE CLAIMED AMOUNT OF DISALLOWANCE @ 10% SUSTAINED 1 COAL & DIESEL & OIL CONSUMPTION EXPENSES 943914 2 PACKING MATERIALS 8916000 3 REPAIRS & MAINTENANCE 1637000 4 TRAVELLING & CONVEYANCE 1422500 5 OTHER EXPENSES 718100 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE EXPENDITURE CLAIMED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT AS MENTIONED IN GROUNDNO.(1) ABOVE ARE GENU INE EXPENDITURE ACTUALLY INCURRED BY THE ASSESSEE WHOLL Y AND EXCLUSIVELY FOR THE BUSINESS PURPOSES AND, THEREFOR E, THE ADHOC DISALLOWANCES ARE NEITHER JUSTIFIED NOR LAWFUL AND HENCE THE SAME BE KINDLY DELETED. 3. BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE T HAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN A MANUFACTURIN G INDUSTRY, SELLING VARIOUS KINDS OF WOOD AND GLASS PRODUCTS LI KE DENIFFIED WOOD, LAMINATED WOOD, IMPREGNATED WOOD AND GLASS FI BRE LAMINATES, ETC. THE RETURN OF INCOME WAS FILED ON 2 8.09.2013 DECLARING LOSS OF RS.2,96,36,240/-. CASE WAS SELECT ED FOR SCRUTINY ASSESSMENT FOLLOWED BY SERVING OF NOTICES U/S 143(2 ) & 142(1) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD . AO EXAMINED CERTAIN EXPENSES ON TEST CHECK BASIS AND AFTER COND UCTING SUCH VERIFICATION OBSERVED THAT SOME OF THE VOUCHERS ARE MISSING, SOME OF THE VOUCHERS ARE NOT PROPERLY MAINTAINED AND SOME A RE SELF-MADE. PERMALI WALLACE LTD. ITANO.222/IND/2018 3 AFTER GIVING GENERAL FINDING, 20% DISALLOWANCE OF E XPENSES AT RS.1,12,26,228/- WAS MADE IN THE FOLLOWING MANNER: S.NO. HEAD OF EXPENDITURE TOTAL AMOUNT DEBITED IN P & L ACCOUNT (RS.) AMOUNT OF DISALLOWED @ 20% OF EXPENSES (RS.) 1 COAL & DIESEL & OIL CONSUMPTION EXPENSES 9439140 18,87,828 2 PACKING MATERIALS 89,16,000 17,83,200 3 REPAIRS & MAINTENANCE 1,63,70,000 32,74,000 4 TRAVELLING & CONVEYANCE 1,42,25,000 28,45,000 5 OTHER EXPENSES 71,81,000 14,36,200 TOTAL 5,61,31,140 1,12,26,228 4. AFTER MAKING THE EXPENSES DISALLOWANCE OF RS.1,1 2,26,228/- LOSS ASSESSED AT RS.1,84,10,012/-. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A) AND PARTLY SUCCEEDED WHO CONFINED THE ALLEGED DISALLOW ANCE TO 10%. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L AGAINST DISALLOWANCE SUSTAINED BY THE LD. CIT(A). 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOOK S OF ACCOUNTS AND FINANCIAL STATEMENT ARE DULY AUDITED. ALL BOOKS OF ACCOUNTS AND VOUCHERS WERE PLACED FOR VERIFICATION. INSPECTOR WA S DESIGNATED BY THE ASSESSING OFFICER TO MAKE VERIFICATION. NO SPEC IFIC INSTANCE HAS BEEN MENTIONED IN THE ASSESSMENT ORDER SHOWING THE DEFECT IN THE PERMALI WALLACE LTD. ITANO.222/IND/2018 4 BILLS AND VOUCHERS MAINTAINED BY THE ASSESSEE. LD. AO ERRED IN MAKING AD HOC DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC ERROR IN THE BOOKS OF ACCOUNTS. SHE FURTHER CONTENDED THA T IN VIEW OF THE FOLLOWING JUDICIAL PRONOUNCEMENT THE IMPUGNED ADHOC DISALLOWANCE NEEDS TO BE DELETED: 1. DCIT VS. CPR DISTRIBUTORS PRIVATE LIMITED IN ITANO.552/IND/2017 (I.T.A.T.,INDORE) 2. M/S COMMINS TECHNOLOGIES INDIA PRIVATE LIMITED V S. ACIT IN ITANO.231/IND/2016 (I.T.A.T.,INDORE) 8. SHE FURTHER CONTENDED THAT THE ALLEGED EXPENSES ARE PURELY FOR BUSINESS PURPOSE AND THERE IS NO PERSONAL ELEMENT. SINCE THEY HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF BUSINESS, NO ADHOC DISALLOWANCE SHOULD HAVE BEEN MADE. SHE PL ACED RELIANCE ON FOLLOWING JUDGMENTS: 1. SASSOON J. DAVID & CO. (P.) LTD. VS. CIT (1979) 118 ITR 261(SC) 2. S.A. BUILDERS LTD. VS. COMMISSIONER OF INCOME TA X (2007) 288 ITR 1(SC). 3. ADDL. CIT VS. RAJASHTAN SPG. & WVG. MILLS LTD. ( 2005) 274 ITR 465(RAJ) 4. CIT VS. BIRLA COTTON SPG. & WVG. MILLS LTD./BIRL A BROS. (P.) LTD. (1971) 82 ITR 166(SC) 9. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE (DR) VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF THE LOWER AUTHORITI ES. PERMALI WALLACE LTD. ITANO.222/IND/2018 5 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US AND CAREFULLY GONE THROUGH THE JUDGMENT R EFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THE SHO RT ISSUE BEFORE US RELATES TO ADHOC DISALLOWANCE MADE BY THE LD. AO IN THE FOLLOWING MANNER: S.NO. HEAD OF EXPENDITURE TOTAL AMOUNT DEBITED IN P & L ACCOUNT (RS.) AMOUNT OF DISALLOWED @ 20% OF EXPENSES (RS.) 1 COAL & DIESEL & OIL CONSUMPTION EXPENSES 9439140 18,87,828 2 PACKING MATERIALS 89,16,000 17,83,200 3 REPAIRS & MAINTENANCE 1,63,70,000 32,74,000 4 TRAVELLING & CONVEYANCE 1,42,25,000 28,45,000 5 OTHER EXPENSES 71,81,000 14,36,200 TOTAL 5,61,31,140 1,12,26,228 11. LD. CIT(A) SUSTAINED THE DISALLOWANCE TO 10% AS AGAINST THE 20% MADE BY THE LD. AO AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 12. WE OBSERVE THAT IN THE IMPUGNED ASSESSMENT ORDE R LD. AO HAS NOT GIVEN ANY SPECIFIC FINDING POINTING OUT ANY ERR OR/MISTAKE IN THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE. LD. AO HAS ALSO NOT RAISED A DOUBT ON THE GENUINENESS OF THE EXPENSES. SIMILARLY THE REASON GIVEN BY LOWER AUTHORITIES THAT EXPENSES HAV E BEEN INCURRED IN CASH, VOUCHERS ARE SELF-MADE ETC. CANNOT BE A S OLID BASIS TO MAKE ADHOC DISALLOWANCE COMPLETELY IGNORING THE FA CT THAT BOOKS OF PERMALI WALLACE LTD. ITANO.222/IND/2018 6 ACCOUNTS ARE AUDITED AND FINANCIAL STATEMENTS HAVE BEEN CERTIFIED BY THE AUDITOR AFTER DULY EXAMINING THE BOOKS OF AC COUNTS BILLS AND VOUCHERS. IT IS ALSO DISCERNABLE FROM RECORDS THAT AN INSPECTOR WAS ASSIGNED THE JOB FOR THE VERIFICATION OF THE VOUCHE RS IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THE EXERCISE WAS CARRIED OUT BY THE INSPECTOR SEVERAL TIMES. THE ASSESSEE HAS ALSO FILE D VARIOUS REPLIES ON 28.09.2015, 23.11.2015, 22.12.2015, 22.12.2015, 23.01.2016, 04.02.2016, 05.02.2016 & 09.02.2016. THESE FACTS AR E UNDISPUTED THAT THE ASSESSEE MADE SUFFICIENT COOPERATION TO FI LE NECESSARY DETAILS AND PRODUCED BOOKS OF ACCOUNTS AND BILLS AN D VOUCHERS FOR VERIFICATION. NOT A SINGLE INSTANCE HAS BEEN POINT ED OUT BY THE LD. AO ABOUT ANY IRREGULARITIES IN THE BOOKS OF ACCOUNT S MAINTAINED BY THE ASSESSEE. ONLY GENERAL REMARKS HAVE BEEN MADE F OR MAKING 20% ADHOC DISALLOWANCE OF CERTAIN TYPE OF EXPENSES. 13. WE, OBSERVE THAT SIMILAR SET OF FACTS AND ISSUE CAME UP BEFORE THE COORDINATE BENCH INDORE, IN THE CASE OF M/S CUM MINS TECHNOLOGIES INDIA PRIVATE LIMITED VS. ACIT IN ITAN O.231/IND/2016 DATED 15.03.2017 AND ISSUED WAS DECIDED IN FAVOUR O F ASSESSEE THEREBY DELETING THE ADHOC DISALLOWANCE OBSERVING A S FOLLOWS: 13. RELYING THE ABOVE THE LD. DR SUPPORTED THE ACT ION OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE O NLY OFFERED FBT OF 20%, THEREFORE, THE ASSESSING OFFICER WAS QU ITE JUSTIFIED IN MAKING DISALLOWANCE OF 20% OF BALANCE EXPENDITUR E. THE LD. DR FURTHER SUBMITTED THAT DURING THE FIRST APPELLAT E PROCEEDINGS AFTER CONSIDERING SUBMISSION OF THE ASSESSEE THE LD . CIT(A) PERMALI WALLACE LTD. ITANO.222/IND/2018 7 GRANTED PART RELIEF TO THE ASSESSEE AND UPHELD THE 10% OF ADDITION, THEREFORE, THERE COULD BE NO GRIEVANCE OF THE ASSESSEE IN THIS REGARD. ON CAREFUL CONSIDERATION OF OUR SUB MISSIONS, WE OBSERVE THAT UNDISPUTEDLY THE ASSESSEE HAS PAID FBT OF RS.89,5498/- ON ACCOUNT OF TOTAL EXPENSES INCURRED BY THE ASSESSEE ON SALES PROMOTION EXPENSES. THE ASSESSING OFFICER MADE 20% DISALLOWANCE WHICH WAS REDUCED TO 10% BY T HE LD. CIT(A) BUT NO DEFECT OR ANY OTHER DISCREPANCY HAS B EEN POINTED OUT BY THE AUTHORITIES BELOW IN THE CLAIM OF THE AS SESSEE NO ADVERSE MATERIAL, ALLEGATION OR EVIDENCE HAS BROUGH T ON RECORD TO MAKE ADDITION OR TO SUSTAIN PART ADDITION. WE AL SO OBSERVE THAT THE ASSESSEE SUBMITTED ALL THE RELEVANT BILLS AND VOUCHERS BEFORE THE AUTHORITIES BELOW WHICH WERE EXAMINED BY THEM ON TEST CHECK BASIS AND WITHOUT ANY POINTING OUT ANY D EFECT OR DISCREPANCY THEREIN THE ASSESSING OFFICER PROCEEDED TO MAKE AD HOC DISALLOWANCE WHICH WAS REDUCED BY THE LD. CIT(A ) TO 10% THAT TOO WITHOUT ANY BASIS. 14. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT AD HOC ADDITION AS MADE BY THE ASSESSING OFFICER WH ICH HAS BEEN PARTLY UPHELD BY THE LD. CIT(A) WITHOUT ANY RE ASONABLE CAUSE AND JUSTIFIED BASIS, THEREFORE, THE SAME CANN OT BE HELD AS SUSTAINABLE AND HENCE WE DISMISSED THE SAME. ACCORD INGLY GROUND NO.2 OF ASSESSEE IS ALLOWED. 14. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTA NCES OF THE CASE AND RESPECTFULLY FOLLOWING DECISION REFERRED HEREIN ABOVE AND PERMALI WALLACE LTD. ITANO.222/IND/2018 8 OBSERVING THAT REVENUE AUTHORITIES FAILED TO BRING ON RECORD ANY SPECIFIC INSTANCE OR IRREGULARITIES IN THE BILLS AN D VOUCHERS MAINTAINED BY THE ASSESSEE BEFORE MAKING ADHOC DISA LLOWANCE, WE ARE THUS INCLINED TO HOLD IN FAVOUR OF THE ASSESSEE AND DELETE THE IMPUGNED DISALLOWANCE OF EXPENSES SUSTAINED BY THE LD. CIT(A) @ 10%. THUS, GROUND NO.1 & 2 OF THE ASSESSEES APPEAL STANDS ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29.11.20 19. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 29/11/2019 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR